Commentary: How to Speak With Customers

Effective communications are the heart of every business interaction. From discovery to education to setting and managing expectations, communications play a vital role in shaping the client's experience. Whether you work directly with the public or through financial intermediaries such as third-party asset managers, national or regional brokerage firms, independent broker/dealers, registered representatives and/or independent fee-only advisors, the end client must always be kept in mind. Your marketing materials certainly have to communicate why your fund is the best product in its class. But you must also provide the tools needed to get buy-in from the end client. When you communicate with your peers, you can expect that they will apply rational, analytical decision-making. Not so when it's the end client.

Straight From the Horse's Mouth

Loring Ward, a Silicon Valley-based firm that offers portfolio management programs to financial advisors recently engaged research firm Maslansky & Partners to conduct live consumer research at their National Education Conference for advisors. Their team interviewed and videotaped several financial professionals presenting information as if they were speaking to a retail client or prospect. These client-facing advisors addressed topics such as fees, their discovery process and how they work with other professionals (such as CPAs, mutual fund companies and asset management firms, etc.).

On stage, the panel of 13 "everyday consumers," ages 55-70, used dial boxes that showed in real time how they were reacting to both industry and advisor messages. In addition to seeing the real time ratings on big screens, conference attendees (comprised of financial advisors, industry consultants, mutual fund and custodian executives and personal finance academics) heard directly from the investors on stage. Each of the investor panelists was a household financial decision maker,, currently worked with a financial advisor of some sort, and had investable assets of more than $500,000 (excluding their primary residence).

Here are some of the key takeaways:

1. Stop using jargon. Many of the terms we use as industry professionals are unfamiliar - and even confusing - to investors. Some of the words and phrases panelists did not relate well to were terms such as "accumulation phase," "active management," "asset allocation," "diversification," "equities," "longevity risk," and "risk tolerance." "Speak to us plainly so we can understand you," they said in various ways throughout the presentation. They also admitted to nodding as if they understood simple terms such as "outsourcing," "volatility" and "passive management" when they really had no idea what those terms meant - they just didn't want to risk looking stupid or uneducated, so they played along.

2. This time it really is different. While the professionals in the room felt that the stock market and economy was more stable than during the worst of the Great Recession, the panel disagreed. The investors felt that things had fundamentally changed and that it really was different this time. Therefore, they were not impressed with historical data, established theories or Nobel Prize winning academic research. Thus messaging staples, such as charts showing the long-term performance of various indices, may no longer be effective. Whether you are putting out information directly to the general public or arming financial advisors with client-facing information, it's important to focus on upside potential and positive trends.

3. Word things positively. When asked what they found more appealing: an investment that (1) "helps them avoid the risks and threats to retire any way they want" or one that (2) "helps them take advantage of opportunities" the panel unanimously picked the positive statement. If you are trying to motivate people to act, do it with a positive solution, rather than avoiding a problem. Be careful talking about risk. The panel responded well to the phrase "risk protection and growth opportunities" versus just "protecting against risk."

The financial services industry continues to suffer from reputational issues. The way to overcome skepticism is through trust. The world of investing is confusing enough. Financial professionals and financial institutions alike need to speak plainly to investors, in their own language, if trust is to be restored.

While fund managers and industry professional understand the vernacular, average investors don't. Give them easy-to-understand replacements. For example, "cost of owning a mutual fund or other investment," instead of expense ratio; "bonds" instead of fixed income; and "saving and investing for retirement" instead of accumulation phase. Help advosprs truly communicate with clients instead of simply talking at them.

What we learned from the consumer panel is that "people skills" are as important as "financial skills" and that simpler, more effective retail communications are needed.

Marie Swift is chief executive of Impact Communications, a PR and marketing communications firm with financial service firm clients nationwide.